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Strategies & Market Trends : Fundamental Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: bruwin who wrote (2339)	9/30/2012 10:46:36 AM
From: The Ox	Read Replies (2) \| Respond to of 4719

bruwin, On the spreadsheets you show the dividend info. I think it would be interesting to show the accumulated cash available (in the total line at the bottom) and add it to the total return (if that's not being down already). We could also decide to put that cash to work, to purchase more of a stock that's fallen...at any point in time in the future. By looking at the total cash, we could decide whether or not we wanted to "bump up" our purchase of one of our holdings, especially if its trading at a discount. We could decide to buy equal amounts (based on the cash available) of the "2 stocks off the largest % or up the smallest %". Just thinking out loud with this and I was wondering what the rest of you think about this type of approach. Once or twice a year, at the most would by my thought, with the possible exception of a downside trigger of 20% or 30%. If a stock hit that level, it would automatically trigger a buy with 50% of whatever cash was on hand at that time. If we decided to do this, it could easily be added to the spreadsheet as a new column "buy trigger price"..... As to CMI's weakness, I think it's more based on the view that the global economy isn't showing the traction that many would have liked to have seen by now. Especially with regards to China's slowing. I am one of the few who believe that the slowing in China, ultimately, is a very good thing. The key for them is to not let it slow too hard, too fast. That is a very difficult thing to do. They will overshoot their marks in both directions, IMO. This will temporarily cause the markets to "gyrate" in the short term. I think of the analogy of turning and stopping an aircraft carrier. You don't turn it on a dime, it takes many miles to maneuver when it's up to speed! Similarly, open ended QE3 can be turned off at any time or adjusted to account for economic strength or weakness. I believe their goal was psychological: "we stand vigilant".

To: bruwin who wrote (2339)	9/30/2012 4:45:56 PM
From: E_K_S	Read Replies (1) \| Respond to of 4719

Hi Bruwin - You stated: "...Personally, I’d say that Buffet approaches investing differently to Graham in as much that Graham focused a lot of his attention on the Balance Sheet and determining Book Value and how that compared to current share price. Graham would buy if there was a deep discount between the two. Buffett, IMO, takes into account, and puts a lot of emphasis, on those “markers” that one would normally find within the three Financial Statements of a company with Durable Competitive Advantage. He applies ‘above average’ target percentages to ratios obtained from those “markers” and uses those as his starting off point when looking for investments. Of course, the “other non formulaic factors” such as good, honest and reliable management, stock ownership by management, etc... also play their important roles. As a matter of interest, there isn’t one reference, that I could find, in the book, ‘Warren Buffet and the Interpretation of Financial Statements’, to Buffett's use of the Price/Book ratio....". That statement got me thinking about the very low 10 year bond rate and what Buffet might consider as the next Buffet "value". Because the cost of money is so low (historically low), do you think Buffet might consider companies that own assets (ie natural resources) and not those that are necessarily generating large amounts of income now? So rather than focus on the Income Statement and worry about his ROI maybe ROA becomes his larger long term factor especially if he can pick up assets on the cheap (similar to Graham's focus on BV and what's in the balance sheet). So, Buffet never bought Jr. miners and/or small and/or Midcap E&P companies because their "current" financials were typically running at a loss even though many of these companies owned some very valuable assets. Now with the cost of capital at historically low levels, maybe Buffet will be looking to pick up cheap tangible assets. There is at least a 24 month window where rates remain at these low levels and that is plenty of time for many of these marginally profitable but asset rich companies to begin to turn a profit. Maybe his plan is to tap into these undervalued "real asset rich" companies betting that their future cash flows will be above their historical averages if/when rates move higher. We will see where the next big (or small) buy comes in. I will also be looking at how he positions his portfolio relating to his bank buys. Does he up it, buy other regional banks or peels off shares. EKS